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Law, Trust & Institutional Change in China: Evidence from Qualitative Fieldwork

Author

Listed:
  • Ding Chen
  • Simon Deakin
  • Mathias Siems
  • Boya Wang

Abstract

China’s rapid growth in the absence of autonomous legal institutions of the kind found in the west appears to pose a problem for theories which stress the importance of law for economic development. In this paper we draw on interviews with lawyers, entrepreneurs and financial market actors to illustrate the complexity of attitudes to law and economic growth in contemporary China. In the case of product markets, business relations are increasingly characterised by a mix of trust-based transacting and legal formality which is not fundamentally different from practice in the west. Financial markets are less like their western counterparts, thanks to the preponderant role of government in asset allocation, and a lack of transparency in market pricing. However, in both sets of markets we find evidence of a transition from inter-personal trust (guanxi) to impersonal transacting, and of growing demands from business and legal groups for the impartial application of legal rules and market regulations. China’s experience does not suggest that law is irrelevant or unrelated to growth, but that legal and economic institutions coevolve in the transition from central planning to a market economy.

Suggested Citation

  • Ding Chen & Simon Deakin & Mathias Siems & Boya Wang, 2016. "Law, Trust & Institutional Change in China: Evidence from Qualitative Fieldwork," Working Papers wp485, Centre for Business Research, University of Cambridge.
    • Handle: RePEc:cbr:cbrwps:wp485
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    References listed on IDEAS

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    Cited by:

    1. Ting Li & Wenting Fan & Jian Song, 2020. "The Household Structure Transition in China: 1982–2015," Demography, Springer;Population Association of America (PAA), vol. 57(4), pages 1369-1391, August.

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    More about this item

    Keywords

    Chinese law; new institutional economics; law and finance; law and development; guanxi;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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